C-Cell Wireless needed additional capital to expand, so the business incorporate

Question

C-Cell Wireless needed additional capital to expand, so the business incorporated. The charter from the state of Georgia authorizes C-Cell to issue 50,000 shares of 7%, $50 par value cumulative preferred stock and 120,000 shares of $2 par value common stock. During the first month, C-Cell completed the following transactions: Oct 2 Issued 22,000 shares of common stock for a building with a market value of $120,000. 6 Issued 900 shares of preferred stock for $70 per share. 9 Issued 12,000 shares of common stock for cash of $60,000. 10 Declared a $16,000 cash dividend for stockholders of record on Oct. 20 Use a separate Dividends Payable account for preferred and common stock. 25 Paid the cash dividend. Requirements 1. Record the transactions in the general journal. 2. Prepare the stockholders' equity section of C-Cells balance sheet at October 31. 2016. Assume C-Cells net income for the month was $96,000.

Explanation / Answer

Answer 1 Journal Entries Date Account title & explanation Debit Credit Oct-02 Cash 120000 Common stock 44000 Additional paid in Capital - Common stock 76000 (issued 22000 shares of common stock @ $120000) Oct-06 Cash 63000 7% Preferred stock 45000 Additional paid in Capital - Preferred stock 18000 (issued 900 shares of preferred stock @ $70 per share) Oct-09 Cash 60000 Common stock 24000 Additional paid in Capital - Common stock 36000 (issued 12000 shares of common stock @ $60000) Oct-10 Net Income / Retained earnings 16000 Dividends payable - Preferred stock holders 3150 Dividends payable - common stock holders 12850 (dividend payable to stock holders) Oct-25 Dividends payable - Preferred stock holders 3150 Dividends payable - common stock holders 12850 Cash 16000 (Dividend paid to stock holders) Answer 2 Stockholers equity as on October 31,2016 Preferred stock $50 par value , 50000 shares authorised, 900 issued and outstanding $45,000.00 Common stock $2 par value , 120000 shares authorised, 34000 issued and outstanding $68,000.00 Additional paid in capital - Preferred stock $18,000.00 Additional paid in capital - Common stock $1,12,000.00 Retained earnings $80,000.00 Less : Treasury stock $0.00 Total stockholders equity $3,23,000.00 Working Preferred stock outstanding on Oct 20 = $45000 Hence dividend payable to preferred stockholders = $45000 * 7% = $3150

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